DOGS AND DEMONS: Tales From the Dark Side of Japan, by Alex Kerr. Hill and Wang, 2001, 432 pp., $27 (cloth).

An ancient Chinese tale holds that dogs are difficult to draw because they are ubiquitous; demons are easy to create because they spring from the artist's imagination. Or, to put it more plainly, it is difficult to focus on the mundane and familiar, but quite easy to envision the grand, the colorful and the unique.

Applying such wisdom to the economic and social development of an entire country might seem like a dubious task. But Alex Kerr succeeds brilliantly. He argues that Japan's obsession with building "demons" like worthless public-works projects, while ignoring "dogs" like low-key activities that help preserve the environment and traditional culture are the real cause of not only Japan's "Lost Decade," but of a deeper crisis that he defines as cultural malaise.

Kerr, whose previous book, "Lost Japan," was the first publication by a foreigner to win the Shicho Gakugei Literary Prize for nonfiction, is no ordinary Japan observer. With over 35 years firsthand experience living in or dealing with the country, he has watched, with increasing rage, as Japan's obsession with economic growth and public works has led to environmental and social degradation and an estrangement from the rest of the world and the nation's true self.